Agreement reached for purchase of CH Energy by Fortis of Canada (update)

ALBANY, N.Y. -- Fortis Inc. on Monday announced an agreement with state Public Service Commission staff members to increase proposed public service benefits to $49.25 million as part of a $1.5 billion takeover bid of Central Hudson.

The deal comes nearly three months after state commission staff said the Fortis proposal for $20 million in public service benefits was too low and recommended the public benefits figure be set at $85 million plus another $10 million provided in shareholder benefits.

"Over the next few months (state commissioners) will be looking at the joint proposal," Central Hudson spokesman John Maserjian said. "They'll decide whether any additional hearings might be required and we had additionally estimated this transaction would be closing during the first quarter (of 2013). We are now estimating it will take place during the second quarter."

The proposed compromise sets the stage for a state Public Service Commission vote on the entire application as the final approval needed for the takeover.

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"There may be interim hearings or additional steps that will be determined by the commission and the administrative law judge regarding the process but this is a major step toward the transaction," Maserjian said.

Fortis Vice President Barry Perry during a telephone interview said the proposed agreement should not be considered a compromise in the amount of public benefits provided through the proposed takeover.

"It was a negotiated settlement between the parties," he said. "I don't know that I would call it a compromise. Clearly it's a big number and it provides a very substantial benefit to the customers of Central Hudson."

Fortis Inc. in February 2012 announced plans to purchase CH Energy Group, the parent company of Central Hudson Gas & Electric Corp., in a deal that calls for the purchase of CH Energy Group stock at $65 per share and would have Fortis assume $500 million in debt.

CH Energy Group reports having 300,000 electric customers and 75,000 natural gas customer in eight counties, including Ulster, Dutchess, Greene and Columbia. Fortis, which is based in Newfoundland, Canada, reports having about 2 million gas customers in five Canadian provinces, two Caribbean countries, and upstate New York.

The proposed agreement was supported by Dutchess County Executive Marcus Molinaro, Ulster County Executive Michael Hein, and Orange County Executive Ed Diana in a joint press release.

"Through this unprecedented partnership of county executives from Ulster, Orange and Dutchess, we have been able to ensure that the Central Hudson/Fortis merger provides an enhanced $5 million economic development fund to benefit the region and a 12-month rate freeze that better serves all of our citizens," said Hein.

There were a number of other concerns raised by commission staff, which Perry said have been agreed upon.

"All outstanding issues have been settled with regard to the staff," Perry said. "This agreement settles all issues. The commission may have a different view once it sees the settlement, obviously."

Perry also expects a vote on final approval will be sometime between April and June.

"We think we've done a good job of putting this settlement in front of them, but it remains up to the commission what the process is from here," he said.